US court orders India to pay $42.4 mn tax

March 19, 2008 11:14 IST

A US court has ordered India to pay a real estate tax of $42.4 million after it rejected New Delhi's argument that a 26-storey building occupied by its diplomatic staff is exempted from tax under international treaties.

The building located in posh mid town Manhattan partly houses the Indian Mission to the United Nations which is exempt from tax. But the New York city is demanding a tax on the 20-storeys occupied by its diplomatic staff.

India has been arguing that tax cannot be levied as the diplomatic staff, who occupy the apartments, are exempted from tax, but US District Court Judge Jed S Rakoff ruled Monday that under Vienna conventions, only the residence of head of the mission is exempted.

The Indian Ambassador to the United Nations has a residence in a nearby building in Manhattan and the residential apartments in the Mission building are occupied by the junior diplomatic staff.

Besides, India, the Judge ordered Mongolia to pay $4.3 million and the Philippines $10.9

million. Mongolia's tax obligations arise from the two floors of its six-storey building occupied by the staff.

But the Philippines case is quite different as it has rented parts of the building to a restaurant, an airlines office and bank.

However, the State Department had earlier opposed the move, fearing that the US would have to pay millions of dollars for the properties it had acquired in other countries.

But the city went to the court after the diplomatic mission refused to pay the taxes.

The decision, which will bring millions to the city, was praised by its officials who have been demanding that foreign government pay taxes on any property used for non-diplomatic purposes.

Earlier, the city had come down heavily on the diplomatic missions for non payment of traffic fines by their employees.